NAVIN KUMAR KAJARIA,KOLKATA vs. ACIT, CIRCLE - 35, KOLKATA , KOLKATA

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH “SMC” KOLKATA Before Shri S.S, Godara, Judicial Member ITA No.1254-1255/Kol/2018 Assessment Year:2014-15 Naveen Kumar Kajaria ACIT, Circle-35, बनाम / 32, Armenian Street, Aayakar Bhawan, V/s. Kolkata-700001 Poorva, 110, Shantipally, 7th Floor, [PAN No.AGDPK 0069 N] Kolkakta-107 Smt. Sushila Devi Kajaria, बनाम / 32, Armenian Street, ACIT, Circle-36, V/s. Kolkata-001 Aaykar Bhawa, Poorva 110, Shantipally, 7th [PAN No.AFYPK 7990 Q] Floor, Kolkata-107 .. अपीलाथ� /Appellant ��यथ� /Respondent Shri Sunin Surana, Advocate & आवेदक क� ओर से/By Assessee Shri S.M. Surana, Advocate Shri Arindam Bhattacharya, Addl CIT-DR राज�व क� ओर से/By Respondent 03-01-2019 सुनवाई क� तार�ख/Date of Hearing 03-04-2019 घोषणा क� तार�ख/Date of Pronouncement आदेश /O R D E R These two assessees have filed instant appeal(s) for assessment year 2014-15, against the Commissioner of Income-tax (Appeals)-10, Kolkata’s separate order both dated 13.03.2018 passed in case No. 141/CIT(A)-10/C-35/2014-15 & 300/CIT(A)- 10/C-36/2014-15/2016-17/Kol, affirming Assessing Officer’s identical action treating their business loss(es) of ₹2.93.720/- and ₹3,33,500/- followed by commission disallowance in former case to the tune of ₹14,686/- @ 5%; respectively involving proceedings u/s. 143(3) of the Income Tax Act, 1961; in short ‘the Act’. Heard both the learned representative(s) reiterating their respective stands against and in support of the impugned identical business lossdisallowance(s) / addition(s). Case file(s) perused.

ITA No.1254-1255/Kol/2018 A.Y.2014-15 Navin Kr. Kajaria & Smt. Sushila Devi Kajaria Vs. ACIT Cir-35/36 Kol Page 2 2. It transpires during the course of hearing that the CIT(A)’s identical discussion in lead case ITA No.1254/Kol/2018 affirming the impugned addition of bogus los arising from sale of shares held in M/s Nikki Global Finance Ltd. reads as under:- 13. FINDINGS & DECISION 1. I have carefully considered the action of the Ld. AO in treating the claim of loss of Rs.2,93,720/- as bogus, and adding the same as an unexplained cash credit u/s 68 of the Income Tax Act, 1961. After an exhaustive discussions and elaborating the factual and legal matrix, I find that thee Ld. AO has held that the claim of Short Term Capital Loss was to be denied to the assessee-individual, and was to be assessed as unexplained cash credit u/s. 68 of the IT Act. The Ld. AO has placed on record the entire gamut of findings, and there is, in my considered view no further requirement elaboration from this forum. In my view of the facts there are elaborate and direct evidence to clearly indicate that that the entire transactions undertaken by the appellant were merely accommodation entries taken for the purpose of such bogus Short Term Capital loss made by the assessee during the previous year. It is apparent that, in the grab of alleged STCG, the assessee was trying to set off actual incomes against this manufactured loss. 2. The Ld. AO has very carefully analyzed the information received from the Investigation Wing, and has recorded the noteworthy features of the Company whose shares were purchased / sold by the assessee-individual. The economic parameters of the said company over the impugned period has also been brought on record, in the analysis. The rise and fall of the prices as recorded had been brought out by the Ld. AO to be artificial and not commensurate with the normal market, as the Company had no business at all. The Ld. AO has also brought forth information that the Regulatory Authority SEBI has also after investigating such abnormal price increases of certain stocks investigated the matter and suspended trading in certain scripts. It is very clear that the prices of these scripts fell sharply after the offloading of these scripts by pre-arranged and manipulated transactions. The entire transactions were carried out on the Stock Exchange to give it a color of real transactions. 3. I also find that the whole gamut of transactions are unnatural and highly suspicious, and therefore the rules of SUSPICIOUS TRANSACTIONS ought to apply in the instant case. There are grave doubts in the story propounded by the assessee before the authorities below. None of the material produced before the Ld. AO by the assessee- appellant are enough to justify the humongous gains accruing to the assessee by way of Capital Gains. In my considered view the banking documents are mere self serving recitals. The law in the matter of self-serving recitals has been long established by the Hon'ble apex Court. In the case of CIT vs P.Mohankala 291 ITR 278, the Hon'ble Supreme Court held that "the money came by way of bank cheque and was paid through the process of banking transactions was not by itself of any consequences." The burden of proof is on the assessee in the matter of justification of receipts which are of suspicious and dubious nature. In the case of CIT vs. Durga Prasad More (1971) 82 ITR 540 (SC), their Lordships laying down the significance of human probabilities held as under: "in a case where a party relied on self serving recitals in documents, it was for that party to establish the truth of those recitals: the taxing authorities were entitled to look into the surrounding circumstances to find out the reality of such recitals." Similarly in the case of Sumati Dayal vs. CIT

ITA No.1254-1255/Kol/2018 A.Y.2014-15 Navin Kr. Kajaria & Smt. Sushila Devi Kajaria Vs. ACIT Cir-35/36 Kol Page 3 (1995) 214 ITR 801 (SC), their Lordships held as under: "In view of section 68 of the Act, where any sum is found credited in the books of the assessee for any previous year, the same may be charged to income tax as the income of the assesses of that previous year if the explanation offered by the assessee about the nature and source thereof is, in the opinion of the Assessing Officer, not satisfactory. In such a case, there is prima facie, evidence against the assessee viz. the receipt of money, and if he fails -to rebut, the said evidence being un-rebutted, can be used against him by holding that it was a receipt of an income nature. " In the case of Sajjan Das & Sons vs. CIT (2003) 264 ITR 435 (Delhi), their Lordships of the High Court of Delhi, while considering a case in which gifts were received by the assessee through banking channels laid importance on the capacity of the donor for making the gift and his identity as well as importance of relationship between the donor and donee in determination of genuineness of gift held as under: "That a mere identification of the donor and showing the movement of the gift amount through banking channels was not sufficient to prove the genuineness of the gift. Since the claim of the gift was made by the assessee, the onus lay on him not only to establish the identity of the person making the gift but also his capacity to make a gift and that it had actually been received as a gift from the donor. "In my considered view wherever documents are relied upon they should pass the test of normal behaviour of the assessee in the course of business viz., human conduct, preponderance of probability and surrounding circumstances. In my considered view, even if documentary evidence is produced, the same must pass the test of human probabilities and surrounding circumstances if they do not, then addition justified. Reliance on such matters is placed on the case of Smt Phoolwati Devi 314 ITR (AT) 1 (Del.) 4. It must also be stated here that in Commissioner of Income Tax vs NR Portfolio Pvt Ltd on 22 November, 2013, the Hon'ble Delhi High court has held ..... "The Assessing Officer is both an investigator and an adjudicator. When a fact is alleged and stated before the Assessing Officer by an assessee, he must and should examine and verify, when in doubt or when the assertion is debatable. Normally a factual assertion made should be accepted by the Assessing Officer unless for justification and reasons the assessing officer feels that he needs/requires a deeper and detailed verification of the facts alleged. The assessee in such circumstances should cooperate and furnish papers, details and particulars. This may entail issue of notices to third parties to furnish and supply information or confirm facts or even attend as witnesses. The Assessing Officer can also refer to incriminating material or evidence available with him and call upon the assessee to file their response. We cannot lay down or state a general or universal procedure or method which should be adopted by the assessing officer when verification of facts is required. The manner and mode of conducting assessment proceedings has to be left to the discretion of the assessing officer, and the same should be just, fair and should not cause any harassment to the assessee or third persons form whom confirmation or verification is required. The verification and investigation should be one with the least amount of intrusion, inconvenience or harassment especially to third parties, who may have entered into transactions with the assessee. The ultimate finding of the assessing officer should reflect due application or mind on the relevant facts and the decision should take into consideration the entire material, which is germane and which should not be

ITA No.1254-1255/Kol/2018 A.Y.2014-15 Navin Kr. Kajaria & Smt. Sushila Devi Kajaria Vs. ACIT Cir-35/36 Kol Page 4 ignored and exclude that which is irrelevant. Certain facts or aspects may be neutral and should be noted. These should not be ignored but they cannot become the bedrock or substratum of the conclusion. The provisions of Evidence Act are not applicable, but the assessing officer being a quasi judicial authority, must take care and caution to ensure that the decision is reasonable and satisfies the canons of equity, fairness and justice. The evidence should be impartially and objectively analyzed to ensure that the adverse findings against the assessee when recorded are adequately and duly supported by material and evidence and can withstand the challenge in appellate proceedings. Principle of preponderance of probabilities applies. What is stated and the said standard, equally apply to the Tribunal and indeed this Court. The reasoning and the grounds given in any decision or pronouncement while dealing with the contentions and issues should reflect application of mind on the relevant aspects. When an assessee does not produce evidence or tries to avoid appearance before the Assessing Officer, it necessarily creates difficulties and prevents ascertainment of true and correct facts as the Assessing Officer is denied advantage of the contention or factual assertion by the assessee before him. In case an assessee deliberately and intentionally fails to produce evidence before the Assessing Officer with the desire to prevent inquiry or investigation, an adverse view should be taken". 5. In this connection, I would also wish to refer to the decision of the Hon'ble ITAT Bombay Bench 'B' (ITA No.614/Bom/87 A.Y. 1983-84) in the case of M/s. Mont Blane Properties and Industries Pvt. Ltd., which was upheld by the Hon'ble Supreme Court. The Hon'ble Tribunal held that the word 'evidence' as used in sec. 143(3) covered circumstantial evidence also. The word 'evidence' as used in sec.143(3) obviously could not be confined to direct evidence. The word 'evidence' was comprehensive enough to cover the circumstantial evidence also. Under the tax jurisprudence, the word 'evidence' had much wider connotations. While the word 'evidence' might recall the oral and documentary evidence as may be admissible under the Indian Evidence Act the use of word 'material' in Sec.143(3) showed that the assessing officer, not being a court could rely upon material, which might not strictly be evidence admissible under the Indian Evidence Act for the purpose of making an order of assessment. Court often took judicial notice of certain facts which need not be proved before them. The plain reading of section 142 and 143 clearly suggests that the assessing officer may also act on the material gathered by him. The ward 'material' clearly shows that the assessing officer is not fettered by the technical rules of evidence and the like, and that he may act on material which may not strictly speaking be accepted evidence in court of law. 6. The Hon'ble Supreme Court in CIT v. Durga Prasad More[1971] 82 ITR 540 at pages 545-547 made a reference to the test of human probabilities in the following fact situation: - " ..... It is true that an apparent must be considered real until it is shown that there are reasons to believe that the apparent is not the real. In a case of the present kind a party who relies on a recital in a deed has to establish the truth of those recitals. Otherwise it will be very easy to make self- serving statements in documents either executed or taken by a party and rely on those recitals. If all that an assessee who wants to evade tax is to have some recitals made in a document either executed by him or executed in his favor then the

ITA No.1254-1255/Kol/2018 A.Y.2014-15 Navin Kr. Kajaria & Smt. Sushila Devi Kajaria Vs. ACIT Cir-35/36 Kol Page 5 door will be left wide-open to evade tax. A little probing was sufficient in the present case to show that the apparent was not the real. The taxing authorities were not required to put on blinkers while looking at the documents produced before them. They were entitled to look into the surrounding circumstances to find out the reality of the recitals made in those documents . 7. It is a well settled principle of law as declared by the Hon'ble Supreme Court in the case of Sumati Dayal Vs.CIT (214 ITR 801) (SC) that the true nature of transaction have to be ascertained in the light of surrounding circumstances. It needs to be emphasized that standard of proof beyond reasonable doubt has no applicability in determination of matters under taxing statutes. In the present case, it is clear that apparent is not the real as evidenced from the investigation report. Further, the Hon'ble Supreme Court, in the case of Chuhar Mal V CIT (1988) 172 ITR 250, highlighted the fact that the principle of evidence law are not to be ignored by the authorities, but at the same time, human probability has to be the guiding prindple, since the AO is not fettered, by technical rules of evidence, as held by the Hon'ble Supreme Court in the case of Dhakeshwari Cotton Mills v CIT (1954) 261 TR 775. The Hon'ble Supreme Court, in the case of Chuhar Mal V CIT (supra) held that what was meant by saying that evidence Act did not apply to the proceedings under Income-tax Act,1961, was that the rigors of Rules of evidence, contained in the Evidence Act was not applicable; but that did not mean that when the taxing authorities were desirous of invoking the principles of Evidence Act, in proceedings before them, they were prevented from doing so. It was further held by the Hon'ble Apex Court that all that Section 110 of the Evidence Act, 1872 did, was to embody a salutary principle of common law, jurisprudence viz, where a person was found in possessing of anything, the onus of proving that he was not its owner, was on that person. Thus, this principle could be attracted to a set of circumstances that satisfies its conditions and was applicable to taxing proceedings. 8. I am in agreement with the Ld. AO that the transactions relating to the claim of LTCG as made by the Ld. AO come within the ambit of "suspicious transactions", and therefore the rules of suspicious transactions would apply to the case. Payment through Banks, performance through stock exchange and other such features are only apparent features. The real features are the manipulated and abnormal price of off load and the sudden dip thereafter. Therefore, I have to reach the inevitable conclusion that the transactions as discussed by the Ld.AO fall in the realm of "suspicious" and "dubious" transactions. The Ld. AO has therefore necessarily to consider the surrounding circumstances, which he indeed has done in a very meticulous and careful manner. In the case of Win ChadhaVs CIT (International Taxation) in ITA No.3088 & 3107/Del/200S, the Hon'ble Delhi ITAT "B"-Bench has observed, on 31.12.2010 as under: "SUSPICIOUS AND DIBIOUS TRASANCTION HOW TO BE DEAL T WITH: 6.11. The tax liability in the cases of suspicious transactions, is to be assessed on the basis of the material available on record, surrounding circumstances, human conduct, preponderance of probabilities and nature of incriminating information/ evidence available with AO.

ITA No.1254-1255/Kol/2018 A.Y.2014-15 Navin Kr. Kajaria & Smt. Sushila Devi Kajaria Vs. ACIT Cir-35/36 Kol Page 6 6.12. In the case of Sumati Dayal V. CIT (1995) 80 Taxman 89 (SC), the Hon'ble Supreme Court has dealt with the relevance of human conduct, preponderance of probabilities and surrounding circumstance, burden of proof and its shifting on the Department in cases of suspicious circumstances, by following observations: ....... It is, no doubt, true that in all cases in which a receipt is sought to be taxed as income, the burden lies on the department to prove that it is within the taxing provision and if a receipt is in the nature of income, the burden of proving that it is not taxable because it falls within exemption provided by the Act lies upon the assessee. But in view of section 68, where any sum is found credited in the books of the assessee for any previous year, the same may be charged to income-tax as the income of the assessee of that previous year if the explanation offered by the assessee about the nature and source thereof is, in the opinion of the Assessing Officer, not satisfactory. In such case there is prima facie evidence against the assessee, viz., the receipt of money, and if he fails to rebut the same, the said evidence being un-rebutted, can be used against him by holding that it is a receipt of an income nature. While considering the explanation of the assessee, the department cannot, however, act unreasonably. ........... Having regard to the conduct of the appellant as disclosed in her sworn statement as well as other material on the record, an inference could reasonably be drawn that the winning tickets were purchased by the appellant after the event. The majority opinion after considering surrounding circumstances and applying the test of human probabilities had rightly concluded that the appellant's claim about the amount being her winning from races, was not genuine. It could not be said that the explanation offered by the appellant in respect of the said amounts had been rejected unreasonably and that the finding that the said amounts were income of the appellant from other sources was not based on evidence. 11 CIRCUMSTANTIAL EVIDENCE HOW TO BE USED 6.13. It would, at this stage, be relevant to consider the admissibility and use of circumstantial evidence in income tax proceedings. Circumstantial evidence is evidence of the circumstances, as opposed to direct evidence. It may consist of evidence afforded by the bearing on the fact to be proved, of other and subsidiary facts, which are relied on as inconsistent with any result other than the truth of the principal fact. It is evidence of various facts, other than the fact in issue which are so associated with the fact in issue, that taken together, they form a chain of circumstances leading to an inference or presumption of the existence of the principal fact. In the appreciation of circumstantial evidence, the relevant aspects, as laid down from time to time are - (1) the circumstances alleged must be established by such evidence, as in the case of other evidence (2) the circumstances proved must be of a conclusive nature and not totally inconsistent with the circumstances or contradictory to other evidence.

ITA No.1254-1255/Kol/2018 A.Y.2014-15 Navin Kr. Kajaria & Smt. Sushila Devi Kajaria Vs. ACIT Cir-35/36 Kol Page 7 (3) although there should be no missing links in the case, yet it is not essential that everyone of the links must appear on the surface of the evidence adduced; some of these links may have to be inferred from the proved facts; (4) in drawing those inferences or presumptions, the Authorities must have regard to the common course of natural events, to human conduct and their relation to the facts of the particular case. (5)The circumstantial evidence can, with equal facility, be resorted to in proof of a fact in issue which arises in proceedings for the assessment of taxes both direct and indirect, circumstantial evidence can be made use of in order to prove or disprove a fact alleged or in issue. In fact, in whatever proceedings or context inferences are required to be drawn from the evidence or materials available or lacking, circumstantial evidence has its place to assist the process of arriving at the truth.” 6.14. It will also be worthwhile to consider the nature of burden of proof on the AO for proving a fact or circumstance in the income tax proceedings. The questions raised about the tax liability by the AO are to be answered by the assessee by furnishing reasonable and plausible explanations. If assessee is not forthcoming with proper or complete facts or his statement or explanation is contradictory, drawing of suitable inferences and estimation of facts is inevitable. Courts generally will not interfere with such estimate of facts, unless the inferences or estimates are perverse or capricious. 6.15. The Assessee's technical contentions about admissibility and reliance on material available on the AD's record are in the nature of contentions challenging criminal or civil liabilities in a court of law. We are dealing with a process of adjudication of assesses tax liability i.e. assessment under Income Tax Act rather than conducting criminal or civil court proceedings. As held by the Hon'ble Supreme Court in the case of S.S. Gadgil (supra) no 'Iis' is involved in adjudication of tax liability. The Assessee's contention that there was no new material before the AO after the CIT(A)'s setting aside order cannot be accepted. New information and material did indeed come on record. In our view, in a sensitive matter like this, even a single clue or revelation can be of great importance. To reverse the order of the AO on this technical plea will amount to taking a lopsided view of the proceedings. Besides, the JPC has underlined the importance of Reports of investigation agencies like CBI, ORI, EO whose were in the offing, as the relevant investigations were in . process. In view of these observations, we do not accede to the assessee's pleas in this behalf. The Assessee's contentions and objections in this behalf that the material available on record was not admissible as evidence and that it cannot be relied on by the AO, are devoid of any merit and are rejected outright " 9. When the impossible is projected as possible through a plethora of well arranged documents, it would be very reasonable to reject the documents outright as make believe and self serving. In the Case of Usha Chandresh Shah Vs ITO, Ward- 19(1}{2), Mumbai, the Hon'ble ITAT- "F"-Bench Mumbai by their Order for A.Y 2006-07 dated 26th September, 2014 have, in the operational portion adjudicated as under: [ Quote] 9. We have heard the rival contentions and perused the record. The pertinent points are that the assessee has claimed to have purchased the impugned shares through Off market transaction. The purchase price was not paid by cheque, but it was claimed to

ITA No.1254-1255/Kol/2018 A.Y.2014-15 Navin Kr. Kajaria & Smt. Sushila Devi Kajaria Vs. ACIT Cir-35/36 Kol Page 8 have been adjusted against the speculation profit claimed to have been made by the assessee. The small difference of Rs.324/- was claimed to have been paid by way of cash. It is also pertinent to note that the alleged Speculation transaction carried out earlier to the purchase of shares of Prime Capital Markets Ltd was also claimed to have been carried in off market transaction. Another important point is that the assessee did not possess copies of Share certificates or copies of Share transfer forms. The broker M/s Khandelwal & Co., has expressed its inability to furnish copies of contract notes available with it and also failed to furnish its books of account to substantiate the transactions of purchase of shares by the assessee. Since the impugned transaction was an off market transaction, the purchase transaction could not be confirmed by the Kolkata Stock exchange. The said shares were earlier held by M/s Brightsun Merchants (P) Ltd and the assessee had purchased the shares from them. The notice issued to M/s Brightsun Merchants (P) Ltd was returned unserved by the postal authorities with the remark "unknown". In this regard, the assessee had replied that the name of the company was wrongly mentioned by the AO as M/s Brightsuns (P) Ltd and hence the notice got returned. But there is not comment about the address, meaning thereby, the AO had issued notice to the correct address only and hence the slight variation in the name of the company would not normally make any difference. Hence the fact that the notice was returned back only shows that the seller of the shares could not be identified. All these discussions would show that the purchase transaction could not be cross verified by the assessing officer. 10. One more point to be noted here is that the speculation transactions can be entered only on payment of margin money. But the details of said payment are not available. With regard to the query raised by the AO relating to Margin money, the broker M/s D. K. Khandelwal & Co has replied in the context of purchase of shares of M/s Prime Capital markets Ltd and not in the context of speculation transactions Thus, it is seen that the question of keeping margin money for speculation, transactions remains unanswered both by the assessee as well as by the Share broker cited above. Further the speculation transaction is also claimed to be an off market transaction, which further casts shadow of doubt over the claim put forth by the assessee. 11. Though the assessee has claimed to have purchased the shares in physical format in May, 2004, she chose to D-Mat the same only in June 2005, just two months prior to its sale. The shares were sold through a share broker named Sanju Kabra, who is indicted by SEBI for rigging the prices of penny stock shares. It is pertinent to note that the share prices of M/s Prime Capital Markets Ltd went from Rs.5.17 (May, 2004) to Rs.279.50 (Sep., 2005). The assessee could not furnish any reasons or at- least stock market news to support the abnormal increase in the prices of the above said shares. The financial statements of the above said company were also not produced. Though M/s Prime Capital Markets Ltd has confirmed the entries in its books of account with regard to the purchases made by the assessee, it could not identify the name of purchaser to whom the shares were sold by the assessee. 12. We have already seen that the tax authorities have applied the test of human probabilities explained by the Hon'ble Supreme Court in the cases of Sumati Dayal and Durga Prasad More (supra) to disbelieve the claim of Long term Capital gains put forth by the assessee. We notice that the test of human probabilities was not applied by the co-ordinate benches of Tribunal in the case of Shri Avinash Kantilal Jain (supra) and Mr. Shyam R Pawar (supra). Hence, in our view, the assessee cannot take support from the above said decisions. We further notice that the Id CIT(A) has placed reliance on the decision dated 04.1.2011 rendered by ITAT Delhi in the case of Haresh Win Chaddha Vs. DDIT, wherein the Tribunal has expressed the view that

ITA No.1254-1255/Kol/2018 A.Y.2014-15 Navin Kr. Kajaria & Smt. Sushila Devi Kajaria Vs. ACIT Cir-35/36 Kol Page 9 there is no presumption in law that the AO is supposed to discharge an impossible burden to assess the tax liability by direct evidence only and to establish the evasion beyond doubt as in criminal proceedings. Further it was held that the AO can assess on consideration of material available on record, surrounding circumstances, human conduct, preponderance of probabilities and nature of incriminating information / evidence available on record. 13. In the case of Smt. Jamnadevi Agrawal (supra), the Hon'ble Bombay High Court has upheld the order of Tribunal on the reasoning that no fault can be found with the findings recorded by the Tribunal. A perusal of the above said order would show that the revenue in the above said case had contended that the assessees in the group have purchased and sold shares of similar companies through the same broker. Further the purchase prices and sale prices were supported by producing the evidences to show that the said transactions were undertaken at the rates prevailing on the respective dates. Under these set of facts, the High Court held that the findings given by the Tribunal cannot be found fault with and further held that the decision rendered by Hon'ble Supreme Court in the case of Sumati Dayal (supra) was not applicable. In the case of Shri Mukesh Ratilal Marolia (Supra), the Hon'ble Bombay high Court has observed that the assessee has furnished copies of Share certificates to show that the shares were in fact transferred to the name of the assessee before it. Further there was no allegation that the prices of shares purchased by the assessee in the case before High Court were manipulated. 14. However, in the instant case, the assessee could not produce the copies of share certificates and copies of share transfer forms. The transaction of purchase of shares could not be cross verified. The shares of M/s Prime Capital Markets Ltd was declared as "Penny Stock" by SEBI and the broker Sanju Kabra, through whom the shares were sold by the assessee was indicted for manipulating the prices of penny stock shares. Hence, in our view, the tax authorities have rightly applied the test of human probabilities to examine the claim of purchase and sale of shares made by the assessee. 15. We notice that the Mumbai D bench has considered an identical issue in the case of Shri Ramesh Kumar D Jain in ITA No.3192/Mum/2010 relating to assessment year 2006-07. The Tribunal, vide its order dated 15-06-2011, rejected the claim of making speculation gains on the reasoning that speculation transactions could not have been entered into by the assessee therein without paying margin money to the broker. Accordingly, the claim of purchase of shares was rejected by the Tribunal and consequently the claim of sale of shares was also rejected. It is pertinent to note that, in the decisions relied upon by the assessee, the claim of speculation profits was not considered by the Tribunal. In yet another case of Shri Araving M Kariya considered by "A" bench of Mumbai ITAT, the test of human probabilities was applied to reject the claim of profit realized on sale of penny stocks. There should not be any dispute that the onus to produce necessary evidences to convincingly show that the shares were purchased and sold at the prices claimed always lies upon the assessee. Our view finds support from the decision rendered by Hon'ble Guwahati High Court in the case of CIT Vs. Smt. Jasvinder Kaur (357 ITR 638). 16. In view of the foregoing discussions, we are of the view that the decisions relied upon by the assessee cannot be taken support of by the assessee for the reasons discussed supra. Accordingly, we are of the view that the Ld CIT(A) was justified in confirming the order of the assessing officer by applying the test of human probabilities. 17. In the result, the appeal filed by the assessee is dismissed

ITA No.1254-1255/Kol/2018 A.Y.2014-15 Navin Kr. Kajaria & Smt. Sushila Devi Kajaria Vs. ACIT Cir-35/36 Kol Page 10 [ Unquote] 10.Reliance is also placed in the case of Somnath Maini Vs ITO (226) 100 TTJ 917 wherein the Hon'ble Chandigarh bench of !TAT held that if facts and circumstances so warrant that it does not accord with the test of human probabilities, transactions have to be held to be non-genuine. [ Quote] 3. The relevant facts briefly stated are that during the course of assessment proceedings, the AO observed that assessee had incurred a long-term capital loss on account of sale of gold jewellery declared under the VDIS, 1997, amounting to Rs.19,87,705 and also there was a short-term capital gain near to this amount of long term capital loss amounting to Rs. 20,36,700 resulting into net capital gain of Rs. 48,995. The AO on perusal of record further observed that in the case of a family member of the same assessee Shri D.C. Maini, in the same assessment year, similar exercise has been done by the assessee wherein a long-term capital loss of Rs.11,59,066 had been incurred on account of sale of gold jewellery declared under the VDIS and short-term capital gain of Rs. 11,75,100 resulting into a net gain of Rs. 16,034. On going through the nature of transactions, the AO doubted the genuineness of the short-term capital gain in the case of the assessee and he made further inquiry that during the year assessee had purchased 45,000 shares of M/s Ankur International Ltd. At varying rates from Rs. 2.06 to Rs. 3.1 per share and sold them within a short span of six-seven months at the rate varying from Rs. 47.75 to Rs. 55. These shares were purchased through a broker Munish Arora & Co. and sold through another broker M/s S.K. Sharma & Co. The AO took by surprise the astronomical rise in share price of a company from Rs. 3 to Rs. 55 and started further inquiry. The AO issued notice under Section 131 to both the brokers from whom shares were purchased and sold and statements were recorded. The AO also analyzed the balance sheet of- M/s Ankur International Ltd. To justify as to how the share price of a company can go up from a mere Rs. 3 to Rs. 55 in a short span of six to seven months' time. The AO made detailed and extraneous exercise of finding the fundamental of the share of the company by different methods and concluded that these shares were not genuine and transactions were so arranged so as to cover up the loss incurred on account of sale of jewellery only. The AO also recorded the finding that transactions were done at Ludhiana where also the share price of the company is quoted but maximum value of the share quoted was Rs. 17 but that was only in July, 1997, i.e. long before the shares were sold by the assessee to M/s S.K. Sharma & Co. in the months of February and March, 1998. The AO also recorded the finding that although the shares were transferred in the name of the assessee, they were still lying in the name of assessee much after the sale to M/s S.K. Sharma & Co. The learned CIT(A) deleted the addition on the ground that both the brokers from whom the shares have been purchased and sold were called under Section 131 by the AO. Both have confirmed the sale and purchase of said shares. Other aspect of the facts and circumstances raised by the AO was not discussed by the CIT(A) in his order. 4. In appeal before us, the learned Departmental Representative contended that it is highly improbable that shares of a company go up so high in few months' time. The learned Departmental Representative took us through various pages of the assessment order and the paper book wherein sale bill of the shares with the said M/s S.K. Sharma &' Co. were also filed. The learned Departmental Representative pointed out that shares have been sold at Ludhiana when actually stock exchange was not functional - a fact which is also recorded by the AO. The learned Departmental Representative also pointed out that shares have been sold to M/s S.K. Sharma & Co.

ITA No.1254-1255/Kol/2018 A.Y.2014-15 Navin Kr. Kajaria & Smt. Sushila Devi Kajaria Vs. ACIT Cir-35/36 Kol Page 11 on 9th Feb., 1998 and 23'0 March, 1998, whereas from the statement of account of M/s S.K. Sharma & Co., payments have been received by the assessee from 31" March, 1998 to 27'h July, 1998, meaning thereby that had the transactions been genuine, payment could have been received in one go by S.K. Sharma & Co. The learned Departmental Representative pointed out that any such type of transactions relating to these types of company operating on stock exchanges payments are received in piecemeal whereas in normal market share transactions, contract notes are issued by the broker and payments are received in one go. The learned Departmental Representative also argued that as per the statement of S.K. Sharma & Co. recorded at the time of inquiry, he did not produce any books of account and identity of persons to whom the shares have been sold. Ordinarily, when brokers are enquired about share transactions, they keep proper books of account from whom shares have been purchased and sold. However, in this case, S.K. Sharma & Co. failed to provide the names of purchasers of the shares and identity of the purchasers. 5. On the other hand, the learned Authorised Representative contended that in the share market, share price does not move according to the fundamentals of a company. They go up and down as per sentiments prevailing at that time. To controvert, the argument of the learned Departmental Representative, he argued that share prices are quoted at Jaipur Stock Exchange and were quoted on the relevant date of sale at the same price on which shares were sold to M/s S.K. Sharma & Co. However, the learned Departmental Representative controverted his argument by saying that volume of transactions on the relevant dates is only 600 shares on 9th Feb., 1998 and 1000 shares on 23'd March, 1998 whereas number of shares involved in the transactions with S.K, Sharma & Co. are 45000 shares. 6. After hearing the rival submissions, going through the orders of authorities below and paper book, we find that M/s Ankur International Ltd., although it is a quoted company, its shares were not being transacted at Ludhiana Stock Exchange at, the relevant time. Shares have been purchased and sold through the brokers and payments have been received in cheque on different dates as per the statement of account of M/s S.K. Sharma & Co, Factual matrix of the case from start of the purchase of shares at the rate of Rs. 3 to the sale of shares at Rs. 55 in a short span of time and shares being not, quoted at Ludhiana Stock Exchange and the way in which different, instalment payments have been received from the brokers and non-availability of the records of the brokers and the shares remaining in the name of assessee even long after the sale of the shares does not stand the test of probabilities. As rightly pointed out by the learned Departmental Representative, these types of companies function in the capital market whose sale price is manipulated to astronomical height only to create the artificial transaction in the form of capital gain. Surrounding circumstances differ from the normal share market transactions in which they are ordinarily carried out. Taking all the steps together, final conclusion does not accord with the human probabilities. The Hon'ble Supreme Court in the case of CIT v. Durga Prasad More held as under: It is a story that does not accord with human probabilities. It is strange that High Court found fault with the Tribunal for not swallowing that story. If that story is found to be unbelievable as the Tribunal has found and in our opinion, rightly that the decisions remains that the consideration for the sale proceeded from the assessee and therefore, it must be assumed to be his money. It is surprising that the High Court has found fault with the ITO for not examining the wife and the father-in-law of the assessee for proving the Department's case. All that we can say is that the High Court has ignored the facts of life. It

ITA No.1254-1255/Kol/2018 A.Y.2014-15 Navin Kr. Kajaria & Smt. Sushila Devi Kajaria Vs. ACIT Cir-35/36 Kol Page 12 is unfortunate that, the High Court has taken a superficial view of the onus that lay on the Department. 7. The learned CIT(A) only got swayed by the issuance of notice by the AO under Section 131 to both the brokers from whom shares were purchased and sold and came to the conclusion that share transactions were genuine overlooking the mate, gathered by the AO from the statements recorded of broker M/s S.K. Sharma & Co. and the other facts and circumstances that volume of transactions of Jalpur Sock Exchange is only 600 shares and 1000 shares. Payments have been received from that brokers only in Instalments over a period of 6-7 months. It is true that when transactions are through cheques, It looks like real transaction but authorities are permitted to look behind the transactions and find out the motive behind transactions. Generally, It is expected that apparent Is real but it is not sacrosanct. If facts and circumstances so warrant that it does not accord with the test of human probabilities, transactions have been held to be non-genuine, it is highly improbable that share price of a worthless company can go from Rs. 3 to Rs. 55 In a short span of time. Mere payment by cheque and receipt by cheque does not. Render a transaction genuine. Capital gain tax was created to operate in a real world and not that of make belief. Facts of the case only lead to the inference that these transactions are not genuine and make believe only to off set the loss incurred on the sale of jewellery declared under VDIS. In the totality of facts and circumstances of this case and material on record, we are of the considered view that the CIT(A) was not justified In deleting the impugned addition. We, accordingly set aside the order of the CIT(A) and restore that of the AO. 8. In the result, the appeal of the Revenue is allowed. [ Unquote] 11. Moreover, all the judgments relied upon by the appellant fall flat in the face of the facts the case, and the preponderance of probability against the assessee. In a decision of Hon'ble Bombay High Court in the case of Sanjay Blmalchand Jain Vs 'Pr.CIT by their order dated 10'" April, 2017 have upheld the orders of the Hon'ble ITAT, Nagpur Bench dated 18.07.2016 in ITA No. 61/Nag/2013 in Sanjay Bimalchand Jain Vs ITO, lrd-4(2), Nagpur, wherein it was held that on the facts emergent in the case, and the preponderance of probabilities, entire Capital Gains claims were to be treated as fictitious and bogus. Bogus LTCG from Penny stocks: The assessee has not tendered cogent evidence to explain how the shares In an unknown company worth Rs.5 had jumped to Rs.485 In no time. The fantastic sale price was not at all possible as there was no economic or financial basis to justify the price rise. the assessee had Indulged In a dubious share transaction meant to account for the undisclosed Income In the garb of long term capital gain. The gain has accordingly to be assessed as undisclosed credit u/s 68 In view of the above discussion, I find no infirmity in the orders of the Ld. AO, and I confirm the same, holding the claim of STCL of Rs.2,93,720/- to be bogus. The ground ore stands dismissed. 14. Ground No 5 emanates from the action of the Ld. AO in computing Rs.14,686/- as undisclosed expenditure (calculated @ 5% on Rs 2,93,720/-) and adding back the same to total income u/s 69 of the I.T Act 1961. The impugned matter has been dealt with by the Ld. AO under: 5.1.4 In view of the above, it can safely concluded that the assessee has resorted to colourable device in the way of purchase of shares from secondary market at a very high rate and immediately sold out the shares at abnormally

ITA No.1254-1255/Kol/2018 A.Y.2014-15 Navin Kr. Kajaria & Smt. Sushila Devi Kajaria Vs. ACIT Cir-35/36 Kol Page 13 low rate to create loss systematically for the only purpose minimizing the tax liability during the year under consideration. Hence, set off loss of Rs 2,93,720/- with income from other source is here by disallowed u/s 68 of the Income Tax Act, 1961 and added to total income of the assessee. Accordingly, a sum of Rs. 14,686/- being 5% of Rs.2,93,720/- is added as undisclosed expenditure within the meaning of section 69C of the Income-tax Act, 1961. 15. During the course of the appeal, in respect of this ground, the appellant / Ld. A.R for the appellant has made the following submissions: ADDITION OF RS 14686 ON ACCOUNT OF UNDISCLOSED EXPENDITURE The Ld AO has made an addition of Rs 293720 to the total income of the appellant treating short term capital loss as bogus and in consequence has also made an addition of Rs 14686 on account of undisclosed expenditure u/s 69 of the I T Act 1961. We have made submission before your goodself hereinabove to delete the addition of Rs 293720 and on relief being allowed as prayed addition of Rs 14686 will automatically gets deleted as made in consequence to addition of Rs 293720. 16. FINDINGS & DECISION: 1. I have already upheld the ,action of the Ld AO in treating the claim of business loss of Rs.2,93,720/- as bogus. As a natural corollary, the addition of Rs.14,686/- being 5% of Rs.2,93,720/- which had been added back by the Ld AO as undisclosed expenditure within the meaning of section 69C of the Income-tax Act, 1961 is upheld. 2. As a result, this ground of appeal stands dismissed. 3. I have given my thoughtful consideration to rival contentions. Former assessee’s detailed paper book comprising of Assessing Officer show-cause letter dated 02.12.2016 regarding loss in trading of shares trading reply dated 02.12.2016, show-cause letter dated 30.11.2016 with respect to commodity loss, details of share trading loss, copy of contract notes, demat statement, relevant bank statement, difference issued by broker for commodity loss, corresponding brokers contract notes as well as bank statement; stands perused. Mr. Bhattarchya has filed his detailed written submissions to the following effect:- “Respected Sir, Sub: ITA No. 1254/Kol/2018 A.Y-2014-15, the case of Navin Kumar Kajaria vIs ACIT, Cirlce-35, Kolkata.- Case for hearing 03/01/2019 Written Submission - Regarding Your honour is requested to kindly consider the following submission while deciding the case under appeal. 1. This Case has been selected for scrutiny on the basis of inputs received from Investigation Wing about suspicious transaction with a stock giving Short Term

ITA No.1254-1255/Kol/2018 A.Y.2014-15 Navin Kr. Kajaria & Smt. Sushila Devi Kajaria Vs. ACIT Cir-35/36 Kol Page 14 Capital Loss. Therefore, AO has reason to doubt the genuineness of such transaction from the very beginning. 2. First question needs to decide whether investment in the Stock under consideration was an investment decision of the assessee or not? It has never been explained as to how and why assessee was convinced that it was a great company worth investment. Otherwise, assessee could have made such investments in multiple companies on the basis of tips/ recommendation from different sources every now and then. There must be some specific reason as to why assessee selected only this stock and invested substantial amount for acquiring large number of shares at a time which assessee had done ever before. 3. The company under consideration does not satisfy any of the following criterion generally considered by an investor while selecting a company for investment, some of them are as under : • The company should have a good business model and "long-term prospects" • It it controlled by a Good management • Its financial strength and capital structure gives confidence and reduces risk. • Its dividend paying record and earning capacity gives investor confidence of receiving good regular returns whether in the form of dividend or appreciation of its value over a period of time. • Risk management is the key word for any investment decision. Nobody is willing to put a large amount of his hard-earned money into a stock without being convinced that his capital is at least safe. During the course of assessment assessee never explained the reason for selection of that particular stock for investment. It appears, such action had been taken for any other reason which assessee preferred not to disclose. Following issues deserves proper consideration :- 4. In the instant case, the assessee has entered into sale and purchase of shares of Nikki Global Finance Ltd (NGFL). It is found from the submission that the assessee has bought 4300 shares of NGFL for 9,13,5511- on 07/03/2014 and sold 4300 shares of the same scripts on 21103/2014 for Rs. 6,19,8311- and the assessee has incurred alleged business loss of Rs. 2,93,7201- on the sale of those shares. The A.O. then made a deeper study of the price movement and share market behaviour of the entities involving in trade, of the script as the share price moment and the profit earned by the beneficiaries were beyond human probability and the A.O. stated that there is nothing worthwhile to mention on the front of assets and net worth of the company as well, to conclude that it could command such high premiums. The company merely forwarded the share capital received through preferential placement of shares towards loans and advances. It was also found that during the period of astronomical rise of shares price of the scrip or vertical dip, there was no corporate announcement or big order or any such news which could result into such frenzy in the scrip price. Moreover, there was also nothing noted in the BSE, NSE, CSE etc. During the such period a surprise fall of index of the shares listed in those Exchange. The rise and fall of the price of script in the secondary market mainly depends upon the EPS, the business health of company or some new development in the company which promises bright future for the shareholders. Therefore the reasons of this astronomical price fall were located somewhere else and certainly could not be related to the fundamentals or any

ITA No.1254-1255/Kol/2018 A.Y.2014-15 Navin Kr. Kajaria & Smt. Sushila Devi Kajaria Vs. ACIT Cir-35/36 Kol Page 15 hypothetical promising future of the company by any stretch of imagination. This abnormal price fall is also highlighted by the overall percentage decrease in the SENSEX during the period when the shares saw phenomenal price rise. Normally, the SENSEX is a benchmark ofthe average price movement in any share. Most of the stocks which have good market capitalization and are majorly held by public tend follow the price movement of the SENSEX. The deviation in price movement vis-à- vis SENSEX is usually guided by the fundamentals of the company and the behaviour of individual investors. When the price decrease in the shares of the script was compared with the movement in the SENSEX it was seen that there was no correlation. While SENSEX had shown almost no progress, the price of the script falls phenomenally. Thus clearly price rigging was done to decrease the script price significantly. Trade data for Shri Navin Kajaria, the assessee was obtained from the BSE for relevant period. From the such data obtained, Counter Party Member (i.e broker) was identified Consortium Securities Pvt. Ltd.". Consortium Securities Pvt. Ltd" was involved in managed and synchronized transactions as per data gathered by the Investigation Wing, Kolkata. Shri Biplab Choudhary , the alleged operator has accepted that Consortium Securities Pvt. td. was involved in providing accommodation entry in the form of LTCG/STCL. These types of transactions are resorted by the assessee in order to evade tax by set of normal capital gain with such man-made created loss, Investigations into these types of transactions were conducted by director of Income-tax (Investigation) Kolkata and the investigation wing has summarized these transactions as:- The Transaction involves three legs. (i) Purchase of share by the beneficiary. In this the beneficiary is sold a fixed number of shares at a nominal rate. The price and the number of shares to be purchased are decided on the basis of the booking taken and the value up to which price would be rigged. This leg of the transaction mostly is off-line. This is done to save on STT using the loophole in Section 10(38) of the IT act which places restriction of trading by payment of STT on sale of shares and not on purchase. (ii) Price rigging. After the shares have been purchased by the beneficiaries, the syndicate members starts rigging the price gradually through the brokers. In these transactions the volume is almost negligible. Two fixed brokers who are in league with the Syndicate buy shares at a fixed time and at a fixed price. These low volume transactions are managed through paper companies of entry operators. (iii) Final sale by the beneficiary. This is done after beneficiary held the share for required period. The period of holding may be a little more to match the amount of booking with the final rate. The beneficiary is contacted either by Syndicate member or the Broker (Middle man) through whom the initial booking was done. The beneficiary provides the required amount of cash which is routed through some of the paper companies, of the entry operator and is finally parked in one company which will buy the share from the

ITA No.1254-1255/Kol/2018 A.Y.2014-15 Navin Kr. Kajaria & Smt. Sushila Devi Kajaria Vs. ACIT Cir-35/36 Kol Page 16 beneficiary. The paper company issues cheque to the beneficiary. The above mentioned methodology is referred to as Conventional Method. 5. The Modus Operandi to generate bogus STCL. Sometimes, the operator also has request from some companies, which foresee that they are going to have huge profits in their books of accounts. The Company wishes to reduce its taxable income by taking entry of bogus loss in its books of account so as to set-off the Profit, that it is going to earn. These companies are given entry of bogus Short Term Capital Loss in the following manner: Let us suppose that there is a ·Company "B" (Beneficiary) which foresees that it is going to have huge profits in its books of accounts. The Company wishes to reduce its taxable income by taking entry of bogus loss in its books of account so as to set-off the profit that it is going to earn. Now this Company "B" then approaches the Entry operator "0". Operator is a person who manages the overall scheme of the seam. An operator maintains a complex nexus of various paper/bogus entities and is also in control of some companies whose shares are list on one or the other Stock Exchanges. When approached by "B", the operator asks the "B" to buy some specific number of shares a specific listed company. These share are bought by the beneficiary company at very high price on the stock exchange. The shares which are bought by the beneficiary company are held by either the paper/bogus entities maintained by the operator or by the beneficiaries wish to take an entry of bogus LTCG/STCL in their books. The company Nikki Global Finance Ltd. and various brokers, sub brokers and other entities as discussed above where the entry operators in the instant case. Thereafter, the Operator rigs the price of the shares through circular trading and decreases the price of the script. The prices are rigged to an optimum amount over a period of time. Once the price of the shares has been decreased by circular trading, the operator asks the beneficiary company to place a sell option for the shares belonging to the beneficiary in a particular lot size on a particular date and time. The los that is incurred by the Beneficiary Company is returned back to the company in cash. In this way the beneficiary companies desirous of booking a loss their books of account get an entry of bogus STCL which is set-off against the regular profit of the company. The fact is evidenced with the speaking documentary materials available on assessment records of the present case. In this case all those persons including the assessee, who were allotted shares on preferential placement basis as discussed above were the Beneficiaries. The modus operandi mentioned above is based on facts and has been deduced by various investigation wings of the income tax department, SEBI and other government agencies. SEBI in its order in a number of cases has spelt out this modus operandi and successfully established that entities involved in such schemes are manipulating the market to generate loss. He, therefore, on consideration of the circumstantial evidences, natural human conduct and preponderance of probabilities reached a conclusion that the apparent in this case was not real and that these financial transactions were not real but sham ones and the entire edifice was a colourable device used to evade tax. In view of the above, it can safely concluded that the assessee has resorted to colourable device in the way of purchase of shares from secondary market at a very high rate and immediately sold out the shares at abnormally low rate to crate loss systematically for the only purpose minimizing the tax liability during the year under consideration. Hence, set off loss of Rs. 2,93,7201- with income from other source is here by disallowed uls 68 of the Act and added to total income of the assessee . Accordingly, a sum of Rs. 14,686/- being 5% of Rs. 2,93,7201- is added an undisclosed expenditure under section 69C of the Act.

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ITA No.1254-1255/Kol/2018 A.Y.2014-15 Navin Kr. Kajaria & Smt. Sushila Devi Kajaria Vs. ACIT Cir-35/36 Kol Page 18 inflated within a short period and after the sharp rise in the price of shares it again comes down. In the instant case, financials were examined by us and we find that the financial worth of the company is meagre and not at all worth to be invested therein. With such financials, we are unable to understand how there can be manifold increase in the shares. In the light of the duration of transactions and the financials of the company whose shares were transacted, we find that the Revenue has brought sufficient material on record to demonstrate that unaccounted money was introduced in the books of accounts through long term capital gain by adopting such method. " 9. In another case of Usba Chandresb Shab vs ITO (ITA No.6858/Mum/2011) the Hon'ble ITAT Mumbai upheld the findings of the AO who concluded that the assessee has adopted the methodology of acquiring the Long Term Capital Gains in order to convert her black money into white and by applying the principle of human probabilities added the share sale receipts as other source income of the assessee from unexplained cash credits u/s 68. Similar findings were made by the ITA T Mumbai in the case of Arvind M. Kariyavs ACIT (ITA No. 7024IMum/2010). Reliance is also placed in the case of Somnath Mani vs ITO (10 TTJ 917) wherein the Chandigarh Bench of IT A T held that if facts and circumstances warrant that it does not accord with the test of human probabilities transactions have be held to be non-genuine. 10. The Hon'ble ITAT A Bench Chennai in the cases of (a) Pankaj Agarwal & Sons (HUF) Vs ITO, (b) Mamta Agarwal Vs ITO, (c) Rajnish Agarwal & Sons Vs ITO, (d) Ramkis an Agarwal Vs ACIT, (d) R. K Agarwal & Sons(HUF) Vs ITO, (e) Sampatti Agarwal Vs ITO, (f) Rajnish Agarwal Vs ITO, (g) Pankaj Kumar Agarwal Vs ITO in order dated 06/12/2018 has confirmed the addition made by AO u/s 68 of the Act by rejecting the Assessees's claim of exemption u/s 10(38) of the Act on Long Term Capital Gains earned out of purchase and sale of equity shares of the company M/s. SRK industries Ltd. by holding that the transaction are sham and tailored to bring unaccounted money as the legitimated gain in the guise of Long Term Capital Gain which is exempt. U/s 10(38) of the Act. 11. On such issues views of different courts are clearly against Tax avoidance. In the case of CIT vs Sakarial Balabbai (1968) 69 ITR 186 (Guj.), the court clarified the meaning of "Avoidance of Tax" are not colorless words. They are strong and compelling words connoting a positive volition, a deliberate intention on the part of the assessee to a id tax - Transaction must be mala fide. 12. Justice Rangnath Misra of Supreme Court while speaking in the case of Mc Do Ltd. - vs - CTO (1983) 154 ITR 148, observed: "Tax planning may be provided it is within the framework of law. Colourable devices cannot be part of tax planning". And it is wrong to encourage or entertain the benefit that it is colourable to avoid payment of tax by resorting to dubious methods. 13. The Hon'ble ITAT Delhi in the case of Harsh Win Chandha vs DCIT (ITA No. 3088 to 3038 & 31071De1l2005) held that "The admissibility of documents, evidence or material differs greatly in income tax proceedings and criminal proceedings respectively. In criminal proceedings, the charge is to be proved by the state against the accused, establishing it beyond doubt, whereas as per the settled proposition of

ITA No.1254-1255/Kol/2018 A.Y.2014-15 Navin Kr. Kajaria & Smt. Sushila Devi Kajaria Vs. ACIT Cir-35/36 Kol Page 19 law, the income tax liability is ascertained on the basis of the material available on record, the surrounding circumstances, human conduct and preponderance of probabilities. 14. The Hon'ble Delhi High Court in CIT(Addl.) vs Jay Engineering Works Ltd. (1978) 11 ITR 389 (Del.) held that the Assessing Officer has, no doubt, to hear "evidence", but sue evidence may consist of material which would be wholly inadmissible in court of law. 15. In CIT vs Metal Products of India (1984) 150 ITR 714 (P&H), it was held that the AO may gather information in any manner he likes, behind that back of the assessee and utilize the same against the assessee, even if it does not, in all respects satisfy the requirements of the Indian Evidence Act. What is necessary is that he should have material upon which to base the assessment; "material" as distinguished from "evidence" which includes dire and circumstantial evidence. 16. Reliance is also place on the decision of the Hon'ble Supreme Court in the case of CIT vs Mohankala (15/05/2007) wherein the SC held that "The question is what is the true nature and scope of Section 68 of the Act? When and in what circumstances Section 68 of the Act would come into play? That a bare reading of Section 68 suggests that there has to be ere it of amounts in the books maintained by an assessees; such credit has to be of a sum during the previous year; and the assessees offer no explanation about that nature and source of such credit found in the books; or the explanation offer by assessees offers no explanation" means where the assessees offer no proper, reasonable and acceptable explanation as regards the sums found credited in the books maintained by the assessees. It is true the opinion of the Assessing Officer for not accepting the explanation offered by the assessees as not satisfactory is required to be base on proper appreciation of material and other attending circumstances available on record. The opinion of the Assessing Officer is required to be formed objectively with reference to the material available on re ord. Application of mind is the sine qua non for forming the opinion. "In this case the SC reversed the decision of the Hon'ble Madras High Court and upheld the finding of the lower authorities regarding transaction of gift received by assessee even though through banking channel but considered not be real one. What is apparent may not be real : Apex court in the case of Sumati Dayal-Vs- CIT [214 ITR 80] held that the true nature of a transaction has to be ascertained in the light of surrounding circumstances. It is now well settled that Tax Authorities are entitled to look into surrounding circumstances to find out the reality of a transaction by applying the test of human probability. Documentary evidences, in the face of unusual events, as prevailing in the instant case, and without any corroborative or circumstantial evidence/s, cannot be regarded as conclusive. The preponderance of probabilities only denotes the simultaneous existence of several 'facts', each probable in itself, albeit low, so as to cast a serious doubt on the truth of the reported 'facts', which together make up for a bizarre statement, leading to the inference of collusiveness or a device set up to conceal the truth, i.e., in the absence of credible and independent evidences. The circumstantial evidences show that the investee company is a penny stock company, with no credentials, and the sale rates of its stock was greatly lowered

ITA No.1254-1255/Kol/2018 A.Y.2014-15 Navin Kr. Kajaria & Smt. Sushila Devi Kajaria Vs. ACIT Cir-35/36 Kol Page 20 artificially, with no real buyers. So the logical inference that only can be drawn is that the sale is not real but bogus and an arranged one. Theory of probability Natural law of probability which is time and again considered by the highest court of law as guiding principal for testing the genuinely of situation/circumstances in an transaction. Any deviation from such law being it unnatural and unbelievable in normal sense and liable to be considered as doubtful and bogus. Every situation revolve around us following this theory of probability. It is evident that everything i.e. from purchase of stock till receiving of cheque for its alleged sale were done in a systematic and organized manner to give it a real and legal colour by a group of persons (being the operators) on receipt of cash from the assessee. As everything is arranged one and not real, so no question arises to consider the receipt as sale proceeds or loss from stock sale. On consideration of the circumstantial evidences, natural human conduct and preponderance of probabilities and the case laws that what is apparent in this case is not real, and that these financial transactions were no real but sham ones.

I find at the outset that the issue as to whether the instant loss(es) claimed at the assessee’s behest is genuine or not as per circumstantial evidence has already been the subject-matter of various judicial precedents. This tribunal’s co-ordinate bench’s decision in Aditya Vikram Surreka HUF vs. ITO in ITA No.1650/Kol/2018 decided on 28.11.2018 has already negated application of circumstantial evidence in similar backdrop of facts as follows:- “5. We have heard the rival submissions. It emerges at the outset that both the lower authorities have adopted identical line of reasoning in treating the sale consideration received on transfer of shares in aforesaid companies to be bogus thereby treating the same as unexplained cash credits u/s 68 of the Act. The ld DR drew our attention to a voluminous exercise undertaken by the ld AO involving a long drawn process of stock market prices rigging in collusion with the various entry operators. The ld DR argued that the assessee had made investment in shares of the aforesaid companies not having any sound financial position or business activity so as to justify the long term capital gains to this extent. The cases of Sumati Dayal vs. CIT 214 ITR 801 (SC) and CIT vs. Durga Prasad More (1971) 82 ITR (SC) were quoted in support to plead that both the lower authorities have made it clear in their respective order(s) about the assessee having acted in collusion with various entry operators for the purpose of bogus long term capital gains in issue. There is no dispute that assessee having derived the Long Term Capital Gains (LTCG in short) on transfer of shares held in Nikki Global Finance Ltd and S R K Industries Ltd. The ld DR did not controvert the findings given by the co-ordinate bench decision of this tribunal in assessee’s favour in the case of Smt Madhu Killa vs ACIT in ITA No. 834/Kol/2018 for Asst Year 2014-15 dated 2.11.2018 in respect of shares of Nikki Global Finance Ltd, wherein it was held as under:- “3. Before us the Ld. AR submitted that the addition made by the AO and upheld by the Ld. CIT(A) was based on presumption and suspicion alone and, therefore, perverse in the eyes of law. In the course of hearing of the case, the Ld. AR referred to various documentary evidences furnished in the paper book in support of the claim of the assessee to prove the genuineness of the transactions relating to LTCG on sale of shares. The Ld. AR drew our attention to the order of the AO wherein the AO has

ITA No.1254-1255/Kol/2018 A.Y.2014-15 Navin Kr. Kajaria & Smt. Sushila Devi Kajaria Vs. ACIT Cir-35/36 Kol Page 21 erroneously recorded at para 3.1 that the assessee had purchased the shares of M/s. NFGL off market (not through established stock exchange) whereas the assessee had purchased the shares of M/s. NFGL through M/s. M. Prasad & Co. Ltd. which is a recognized stock broker of Bombay Stock Exchange (BSE), through whom the assessee had made several investments in various scrips/shares and drew our attention to page 5 of paper book wherein the details of investment made by the assessee for the previous AY 2013-14 is given which shows that assessee has dealt with 30 nos. of different shares of companies including Reliance, Infosys, L & T etc. and it was thus contended that this transaction with M/s. NFGL was not the single investment which assessee carried out through this broker. Thus, according to Ld. AR, the AO erred in finding that the assessee had purchased shares of M/s. NFGL in off market and not through established stock exchange. The Ld. AR drew our attention to page no. 6 of the paper book wherein we note that the assessee had purchased on 13.06.2012, 25000 shares at cost price of Rs.128.25 of M/s. NFGL wherein the assessee had remitted STT of Rs.4007.81 and that the transaction has happened through M/s. M. Prasad & Co. Ltd. which is a registered member of the Bombay Stock Exchange. The Ld. AR drew our attention to page 18 of the paper book which shows that the amount in question i.e. Rs.32,21,216/- has been transferred on 14.06.2012 from assessee’s account to the registered broker’s account i.e. of M/s. M. Prasad & Co.. The Ld. AR drew our attention to page 26 of the paper book which is the de mat transaction statement wherein we note that on 15th June, 2012 this 25000 shares have been deposited of M/s. NFGL by inter depository transaction (CBS). Thus, we find that the AO erred in recording a finding of fact that the assessee had made the purchase of M/s. NFGL not through Stock Exchange but it was an off market transaction. We find that the assessee had purchased the shares of M/s. NFGL through registered broker M/s. M. Prasad & Co. which was a registered stock broker of the Bombay Stock Exchange and on 13.06.2012 assessee purchased 25000 shares at Rs.128.25 per share on which STT was paid and the total transaction of Rs.32,21,213.10 was paid through account payee cheque to the registered broker and the shares were deposited in the demat account (D. P. Stock HLDG Corp of India Ltd.) The following other documents were also filed before the authorities below: i) Copy of balance sheet of the assessee as on 31.03.2013 (FY 2012-13 corresponding to AY 2013-14) along with details of investments (page nos. 4 and 5 of paper book) wherein 25000 shares of M/s. NFGL of value of Rs.32,21,269.18 is reflected and we note that the assessee had made investment in 30 no. of different shares including that of L&T, Reliance, TISCO, Infosys, ICICI, Infotech etc. and had investments altogether of Rs.87,44,010.73 which has been duly reflected in page 4 of the paper book which is the Balance Sheet as on 31.03.2013 wherein the share investment of Rs.87,44,010.73 has duly been reflected and is tallying. ii) Contract Note for purchase of shares of M/s. NFGL is found placed at page 6 of the paper book. iii) Copy of the bank statement highlighted the payment of purchase of shares through bank (paper book page 18 & 19). iv) Copy of de mat holding statement and transaction statement highlighting the movement of shares from page 25 to 33 of the paper book. v) Copy of ledger of assessee in the books of the share broker pages 34 to 36 of the paper book. Following documents were filed before the authorities below in support of the sale of the shares: i) copy of contract note for sale of shares of M/s. NFGL page 7 to 17 of the paper book. ii) ii) Copy of bank statement highlighting the receipt of sale consideration pages 20to 23 of paper book.

ITA No.1254-1255/Kol/2018 A.Y.2014-15 Navin Kr. Kajaria & Smt. Sushila Devi Kajaria Vs. ACIT Cir-35/36 Kol Page 22 iii) iii) Copy of de mat holding statement and transaction of the statement which highlighting the movement of shares pages 24 to 33 of the paper book. 4. It was also pointed out by the Ld. AR that purchase of shares of M/s. NFGL in FY 2012-13 was duly recorded in the balance sheet and the return was processed by the department u/s. 143(1) of the Act thereby the department has accepted the purchase of shares of M/s. NFGL, however, when sales of the same scrips happened it was not accepted by the AO which action of the AO, according to Ld. AR, was unjustified and need to be set right. The Ld. AR further pointed out that the AO in his eagerness to somehow hold that transaction of M/s. NFGL bogus has erroneously made a factual finding that purchases of these shares happened off market when the fact was that the purchase of M/s. NFGL shares were made through Bombay Stock Exchange. The Ld. AR pointed out that the evidence and documents furnished by the assessee before the authorities below were neither found to be false nor fabricated. The Ld. AR submitted that the AO doubted the genuineness of the sale transaction on the basis of some purported orders of the SEBI and/or the Investigation wing. However, the AO has merely mentioned the date of letter issued by the Director of Investigation. Save and except the date of the letter, according to Ld. AR, there is nothing brought on record by the AO as to how the investigation report concerned the assessee and/or the shares sold by the assessee. The ld AR submitted that the AO on pages 6-9 of the assessment order had merely stated that the Investigation Wing and SEBI conducted some inquiries in respect of some other Companies and as per the report prepared by them, certain patterns and features were identified by them and as per the AO such patterns and features were emerging in the case related to the shares of the Company (i.e. M/s. NFGL) which the assessee dealt with. However save and except making a passing remark or mere reference to so called patterns, there is nothing in the assessment order from which it can be found that the Assessee or the Company (M/s. NFGL) or the Brokers were adversely named/commented upon in the report of investigation. According to ld AR, the AO identified 10-11 adverse features on page 6-7 of the Assessment order, however he wondered as to how these features were relating to the Company (M/s. NFGL) in the case of assessee was not at all demonstrated. Thus according to ld AR, there was no material whatsoever to hold that the Company (M/s. NFGL) dealt by the assessee was having such pattern or features. It was submitted that the AO disallowed the assessee’s claim of LTCG on sale of shares on surmises, suspicion and presumptions alone. It was submitted that the lower authorities have not brought any material or evidence on record to falsify the claim of the assessee or to hold that the share transactions were bogus. 5. The ld AR drew our attention to the fact that the purchase and sale of shares was made on the online platform of the stock exchange; therefore according to ld AR, the assessee did not know the names of the buyers and has no connection and/or relations with any such persons. The transactions of sale of shares were online trading system through his broker from whom he received the sale consideration. The broker also received payments for all his transactions from Stock Exchange. The seller and the buyer cannot know the names of each other as well as that of their respective brokers, who were involved in the trading transactions in the secondary platform. In such a situation according to ld AR, it cannot be presumed that there could be any transfer of cash between the buyers and sellers to convert their unaccounted money of the beneficiaries as alleged by the AO. The ld AR referred to the judgement of Hon’ble Bombay High Court in the case of CIT vs. Lavanya Land Pvt. Ltd. [2017] 83 taxmann.com 161 (Bom) to contend that there was no evidence whatsoever to allege that money changed hands between the assessee and the broker or any other person including the alleged exit provider whatsoever to convert unaccounted money for getting benefit of LTCG as alleged. In the said case, the Hon’ble High Court at Para 21 held that in absence of any material to show that huge cash was transferred from

ITA No.1254-1255/Kol/2018 A.Y.2014-15 Navin Kr. Kajaria & Smt. Sushila Devi Kajaria Vs. ACIT Cir-35/36 Kol Page 23 one side to another, addition cannot be sustained. Similar view, according to Ld. AR, was taken in the following cases:- (i) Baijnath Agarwalla vs. ACIT [2010] 40 SOT 475 (Agra Third Member) (ii) Ganeshmull Biijay Singh Baid HUF vs. DCIT – ITA No. 544/Kol/13 dated 4.12.2015 (Kolkata Tribunal) (iii) Malti Ghanshyambhai Patodia vs. ITO – ITA No. 3400/Ahd/2015 (Ahmedabad Tribunal) (iv) Pratik Suryakant Shah vs. ITO –[ 2017] 77 taxmann.com 260 (Ahmedabad Tribunal) (v) Padduchari Jeevan Prashant vs. ITO – ITA No. 452/Hyd/2015 (Hyderabad Tribunal) (vi) Anil Nand Kishore Goyal vs.ACIT – ITA Nos. 1256/PN/2012 (Pune Tribunal) (vii) CIT vs. Jamna Devi Agrawal – [2012] 20 taxmann.com 529 (Bom HC) 6. The ld AR submitted that all the observations, conclusions and findings of the lower authorities are based on suspicion, surmises and hearsay. According to ld AR, it is trite law that the suspicion howsoever strong, cannot partake the character of legal evidence. Reference was made to the judgement of Hon’ble Supreme Court in the case of Lalchand Bhagat Ambica Ram vs. CIT (1959) 37 ITR 288 (SC, , Umacharan Shaw 37 ITR 271 and Omar Salay Mohamed Sait 37 ITR 151. The ld AR submitted that the entire case of the revenue is based upon the presumption that the assessee has ploughed back his own unaccounted money in the form of bogus LTCG. However, this presumption or suspicion howsoever strong it may be, but needs to be corroborated by some evidence to establish a link that the assessee had brought back his unaccounted income in the form of LTCG. The ld AR referred to the judgement of Special Bench of Mumbai Tribunal in the case of GTC Industries Ltd. vs. ACIT [2017] 164 ITD 1 (Mumbai-Trib.)(SB) The Tribunal observed as under: 46. ......... Ultimately the entire case of Revenue hinges upon the presumption that assessee is bound to have some large share in so called secret money in the form of premium and its circulation. However, this presumption or suspicion how strong it may appear to be true but needs to be corroborated by some evidence to establish a link that GTC actually had some kind of a share in such secret money. It is quite a trite law that suspicion howsoever strong may be but cannot be the basis of addition except for some material evidence on record. The theory of ‘preponderance of probability’ is applied to weigh the evidences of either side and draw a conclusion in favour of a party which has more favourable factors in his side. The conclusions have to be drawn on the basis of certain admitted facts and materials and not on the basis of presumptions of facts that might go against the assessee. Once nothing has been proved against the assessee with aid of any direct material especially when various rounds of investigations have been carried out, then nothing can be implicated against the assessee 7. The ld AR submitted that there is no direct evidence against the assessee brought on record by AO to hold that the assessee introduced his own unaccounted money by way of bogus LTCG. The ld AR submitted that although various investigations were carried out by different agencies, there is no evidence against the assessee and/or the brokers and/or the Companies in which the assessee dealt with to hold that the assessee was a beneficiary to the modus operandi adopted by different entities / brokers / entry operators. The ld AR submitted that, in view of the aforesaid judgement of Special Bench of Mumbai Tribunal, various case laws relied on by the AO against the assessee are irrelevant in as much as the said orders are based on conclusions drawn on the basis of circumstantial evidences only without any material evidence on record and cannot be applied in the case in hand because assessee has

ITA No.1254-1255/Kol/2018 A.Y.2014-15 Navin Kr. Kajaria & Smt. Sushila Devi Kajaria Vs. ACIT Cir-35/36 Kol Page 24 discharged the burden of proof by producing relevant legally admissible evidence, which the AO could not find fault with. 8. The ld AR vehemently submitted that the assessee has furnished all evidences in support of the claim of the assessee that it earned LTCG on transactions of his investment in shares. The purchase of shares had been accepted by the AO in the year of its acquisition and thereafter until the same were sold. The transactions were all through account payee cheques and reflected in the books of accounts. The purchase and sale of shares and the sale of shares were also reflected in Demat account statements. The sale of shares suffered STT, brokerage etc. In the facts and circumstances of the case, it cannot be held that the transactions were bogus. The ld AR referred to the following judgments of Jurisdictional High Court:- (i) M/s Classic Growers Ltd. vs. CIT [ITA No. 129 of 2012] (Cal HC) – In this case the ld AO found that the formal evidences produced by the assessee to support huge losses claimed in the transactions of purchase and sale of shares were stage managed. The Hon’ble High Court held that the opinion of the AO that the assessee generated a sizeable amount of loss out of prearranged transactions so as to reduce the quantum of income liable for tax might have been the view expressed by the ld AO but he miserably failed to substantiate that. The High Court held that the transactions were at the prevailing price and therefore the suspicion of the AO was misplaced and not substantiated. (ii) CIT V. Lakshmangarh Estate & Trading Co. Limited [2013] 40 taxmann.com 439 (Cal) – In this case the Hon’ble Calcutta High Court held that on the basis of a suspicion howsoever strong it is not possible to record any finding of fact. As a matter of fact suspicion can never take the place of proof. It was further held that in absence of any evidence on record, it is difficult if not impossible, to hold that the transactions of buying or selling of shares were colourable transactions or were resorted to with ulterior motive. (iii) CIT V. Shreyashi Ganguli [ITA No. 196 of 2012] (Cal HC) – In this case the Hon’ble Calcutta High Court held that the Assessing Officer doubted the transactions since the selling broker was subjected to SEBI’s action. However the transactions were as per norms and suffered STT, brokerage, service tax, and cess. There is no iota of evidence over the transactions as it were reflected in demat account. The appeal filed by the revenue was dismissed. (iv) CIT V. Rungta Properties Private Limited [ITA No. 105 of 2016] (Cal HC) – In this case the Hon’ble Calcutta High Court affirmed the decision of this tribunal , wherein, the tribunal allowed the appeal of the assessee where the AO did not accept the explanation of the assessee in respect of his transactions in alleged penny stocks. The Tribunal found that the AO disallowed the loss on trading of penny stock on the basis of some information received by him. However, it was also found that the AO did not doubt the genuineness of the documents submitted by the assessee. The Tribunal held that the AO’s conclusions are merely based on the information received by him. The appeal filed by the revenue was dismissed. (v) CIT V. Andaman Timbers Industries Limited [ITA No. 721 of 2008] (Cal HC) – In this case the Hon’ble Calcutta High Court affirmed the decision of this Tribunal wherein the loss suffered by the Assessee was allowed since the AO failed to bring on record any evidence to suggest that the sale of shares by the Assessee were not genuine.

ITA No.1254-1255/Kol/2018 A.Y.2014-15 Navin Kr. Kajaria & Smt. Sushila Devi Kajaria Vs. ACIT Cir-35/36 Kol Page 25 (vi) CIT V. Bhagwati Prasad Agarwal [2009- TMI-34738 (Cal HC) in ITA No. 22 of 2009 dated 29.4.2009] – In this case the Assessee claimed exemption of income from Long Term Capital Gains. However, the AO, based on the information received by him from Calcutta Stock Exchange found that the transactions were not recorded thereat. He therefore held that the transactions were bogus. The Hon’ble Jurisdictional High Court, affirmed the decision of the Tribunal wherein it was found that the chain of transactions entered into by the assessee have been proved, accounted for, documented and supported by evidence. It was also found that the assessee produced the contract notes, details of demat accounts and produced documents showing all payments were received by the assessee through banks. On these facts, the appeal of the revenue was summarily dismissed by High Court. 9. The ld AR submitted before us that where the purchase and sale transactions are supported and evidenced by Bills, Contract Notes, Demat statements and bank statements etc., and when the transactions of purchase of shares were accepted by the ld AO in earlier years, the same could not be treated as bogus simply on the basis of some reports of the Investigation Wing and/or the orders of SEBI and/or the statements of third parties. In support of the aforesaid submissions, the ld AR, in addition to the aforesaid judgements, has referred to and relied on the following cases:- (i) Baijnath Agarwal vs. ACIT – [2010] 40 SOT 475 (Agra (TM) (ii) ITO vs. Bibi Rani Bansal – [2011] 44 SOT 500 (Agra) (TM) (iii) ITO vs. Ashok Kumar Bansal – ITA No. 289/Agra/2009 (Agra ITAT) (iv) ACIT vs. Amita Agarwal & Others – ITA Nos. 247/(Kol)/ of 2011 (Kol ITAT) (v) Rita Devi & Others vs. DCIT – IT(SS))A Nos. 22-26/Kol/2p11 (Kol ITAT) (vi) Surya Prakash Toshniwal vs. ITO – ITA No. 1213/Kol/2016 (Kol ITAT) (vii) Sunita Jain vs. ITO – ITA No. 201 & 502/Ahd/2016 (Ahmedabad ITAT) 10 ITA No.1650/Kol/2018 Aditya Vikram Sureka HUF A.Yr. 2014-15 10 (viii) Ms. Farrah Marker vs. ITO – ITA No. 3801/Mum/2011 (Mumbai ITAT) (ix) Anil Nandkishore Goyal vs. ACIT – ITA Nos. 1256/PN/2012 (Pune ITAT) (x) CIT vs. Sudeep Goenka – [2013] 29 taxmann.com 402 (Allahabad HC) (xi) CIT vs. Udit Narain Agarwal – [2013] 29 taxmann.com 76 (Allahabad HC) (xii) CIT vs. Jamnadevi Agarwal [2012] 20 taxmann.com 529 (Bombay HC) (xiii) CIT vs. Himani M. Vakil – [2014] 41 taxmann.com 425 (Gujarat HC) (xiv) CIT vs. Maheshchandra G. Vakil – [2013] 40 taxmann.com 326 (Gujarat HC) (xv) CIT vs. Sumitra Devi [2014] 49 Taxmann.com 37 (Rajasthan HC) (xvi) Ganeshmull Bijay Singh Baid HUF vs. DCIT – ITA Nos. 544/Kol/2013 (Kolkata ITAT) (xvii) Meena Devi Gupta & Others vs. ACIT – ITA Nos. 4512 & 4513/Ahd/2007 (Ahmedabad ITAT) (xviii) Manish Kumar Baid ITA 1236/Kol/2017 (Kolkata ITAT) (xix) Mahendra Kumar Baid ITA 1237/Kol/2017 (Kolkata ITAT) 10. The ld AR further submitted before us that once the assessee has furnished all evidences in support of the genuineness of the transactions, the onus to disprove the same is on revenue. He referred to the judgement of Hon’ble Supreme Court in the case of Krishnanand Agnihotri vs. The State of Madhya Pradesh [1977] 1 SCC 816 (SC). In this case the Hon’ble Apex Court held that the burden of showing that a particular transaction is benami and the appellant owner is not the real owner always rests on the person asserting it to be so and the burden has to be strictly discharged by adducing evidence of a definite character which would directly prove the fact of benami or establish circumstances unerringly and reasonably raising inference of that fact. The Hon’ble Apex Court further held that it is not enough to show circumstances which might create suspicion because the court cannot decide on the basis of suspicion. It has to act on legal grounds established by evidence. The ld AR submitted that similar view has been taken in the following judgments while deciding the issue relating to exemption claimed by the assessee on LTCG on alleged Penny Socks.

ITA No.1254-1255/Kol/2018 A.Y.2014-15 Navin Kr. Kajaria & Smt. Sushila Devi Kajaria Vs. ACIT Cir-35/36 Kol Page 26 (i) ITO vs. Ashok Kumar Bansal – ITA No. 289/Agr/2009 (Agra ITAT) (ii) ACIT vs. J. C. Agarwal HUF – ITYA No. 32/Agr/2007 (Agra ITAT) 11. The ld AR further submitted that the AO was not justified in taking an adverse view against the assessee on the ground of abnormal price rise of the shares and alleging price rigging. It was submitted that there is no allegation in orders of SEBI and/or the enquiry report of the Investigation Wing to the effect that the assessee, the Companies dealt in and/or his broker was a party to the price rigging or manipulation of price in BSE. The ld AR referred to the following judgments in support of this contention wherein under similar facts of the case it was held that the AO was not justified in refusing to allow the benefit under section 10(38) of the Act and to assess the sale proceeds of shares as undisclosed income of the assessee under section 68 of the Act :- (i) ITO vs. Ashok Kumar Bansal – ITA No. 289/Agr/2009 (Agra ITAT) (ii) ACIT vs. Amita Agarwal & Others - ITA Nos. 247/(Kol)/ of 2011 (Kol ITAT) (iii) Lalit Mohan Jalan (HUF) vs. ACIT – ITA No. 693/Kol/2009 (Kol ITAT) (iv) Mukesh R. Marolia vs. Addl. CIT – [2006] 6 SOT 247 (Mum) 12. The ld AR also submitted that the AO was not justified in disallowing the assessee’s claim of exemption under section 10(38) of the Act by concluding that the transactions of the assessee resulting in LTCG on sale of shares were bogus relying on the statements of various unknown persons recorded by Investigation Wing wherein these persons accepted to have provided accommodation entries of various natures including LTCG to different persons. The ld AR submitted that in the statement of third parties, the name of the assessee was not implicated. Even otherwise, no adverse inference could be taken against the assessee on the basis of untested statements without allowing opportunity of crossexamination. The ld AR referred to and relied on the following judgements in support of the aforesaid submissions:- (i) Andman Timber Industries vs. CCE – [2015] 62 taxmann.com 3 (SC) (ii) ITO vs. Ashok Kumar Bansal – ITA No. 289/Agr/2009 (Agra ITAT) (iii) ACIT vs. Amita Agarwal & Others – ITA No. 247/(Kol) of 2011 (Kol ITAT) (iv) ITO vs. Bijaya Ganguly - ITA Nos. 624 & 625/Kol/2011 (Kol ITAT) (v) Ganeshmull Bijay Singh Baid HUF vs. DCIT – ITA Nos. 544/Kol/2013 (Kolkata ITAT) (vi) Rita Devi & Others vs. DCIT – IT(SS))A Nos. 22-26/Kol/2p11 (Kol ITAT) (vii) Malti Ghanshyambhai Patadia vs. ITO - ITA No.3400/Ahd/2015 (Ahmedabad ITAT) (viii) Pratik Suryakant Shah vs. ITO – [2017] 77 taxmann.com 260 (Ahmedabad ITAT) (ix) Sunita Jain vs. ITO - ITA No. 201 & 502/Ahd/2016 (Ahmedabad ITAT) (x) Atul Kumar Khandelwal vs. DCIT – ITA No. 874/Del/2016 (Delhi ITAT) (xi) Farah Marker vs. ITO – ITA No. 3801/Mum/2011 (Mumbai ITAT) 13. The ld AR also submitted that the AO was not justified in invoking the provisions of section 68 of the Act to hold that the sale proceeds of shares are unexplained cash credits in the hands of the assessee. According to him, there is no evidence on record to disbelieve that the assessee sold shares through registered share and stock broker with Bombay Stock Exchange. The assessee produced all evidences to explain the source of the amounts received by the assessee from the broker, therefore according to ld AR, the AO was not justified in assessing the sale proceeds of shares as unexplained cash credit under section 68 of the Act. 14. The ld AR submitted that there is no direct evidence against the assessee brought on record by AO to hold that the assessee introduced his own unaccounted money by way of bogus LTCG. The ld AR submitted that although various investigations were carried out by different agencies, there is no evidence against the assessee and/or the brokers and/or the Company in which the assessee dealt with to adversely hold that the assessee was a beneficiary to the modus operandi adopted by different entities / brokers / entry operators. The ld AR submitted that, in view of the aforesaid judgement of Special Bench of Mumbai

ITA No.1254-1255/Kol/2018 A.Y.2014-15 Navin Kr. Kajaria & Smt. Sushila Devi Kajaria Vs. ACIT Cir-35/36 Kol Page 27 Tribunal, various case laws relied on by the AO against the assessee are irrelevant in as much as the said orders are based on conclusions drawn on the basis of circumstantial evidences only without any material evidence on record and cannot be applied in the case in hand because assessee has discharged the burden of proof by producing relevant legally admissible evidence, which the AO could not find fault with. On the other hand, the Ld. DR vehemently supported the impugned order of Ld. CIT(A)/AO and does not want us to interfere in the impugned order. 15. We have heard both the parties and perused the records. It was brought to our notice by the Ld. AR in the assessment order at para 3.13 the AO has stated in sub-para ‘c’ that “the assessee purchased shares at Rs.865.97 per share ……”. It was pointed out by the Ld. AR that the assessee has purchased share of M/s. NFLG for Rs.128.25 per share which is reflected in page 6 of the paper book which is the contract note. According to Ld. AR this is nothing but cut paste of some other case and has nothing to do with the assessee’s case and it exposes non-application of mind of the AO. We find that the AO has stated that the assessee has purchased the share at Rs.865 per share whereas the assessee had purchased the shares at Rs.128.25, therefore, we note that the AO erred in making the erroneous finding of the purchase value of the shares. We note that in this case the assessee was investing in different shares of the companies (30 different shares of companies ) as evident from perusal of page 5 of paper book and the purchase and sale of shares in M/s. NFGL is one among the 30 odd shares the assessee dealt with as an investment through a registered stock broker of Bombay Stock Exchange “M. Prasad & Co. Ltd.” The assessee had purchased 25000 shares of M/s. NFGL on 13.06.2012 at a cost price of Rs.128.25 per share and remitted Security Transaction Tax (STT) of Rs.4007.81 and at a total cost price of Rs.32,16,000/- (see contract note placed at page 6 of paper book). Thus we find that the AO erred in finding that the assessee had made the purchase not through Stock Exchange but it was an off market transaction. We find that the assessee had purchased through registered broker M/s. M. Prasad & Co. who was registered stock broker of the Bombay Stock Exchange and on 13.06.2012 assessee purchased 25000 shares at Rs.28.25 per share on which STT was paid and the total transaction of Rs.32,21,213.10 was paid through account payee cheque to the registered broker and the shares were deposited in the demat account (D. P. Stock HLDG Corp of India Ltd.) 16. The sale of M/s. NFGL shares took place through the same registered stock broker of Bombay Stock Exchange from 05.08.2013 to 30.12.2013 for sale price ranging from Rs.820/- to Rs.921/- per scrip (see contract note placed from pages 7 – 17 of paper book). We note from perusal of pages 18-19 of paper book, which reveals that the payment for purchase of shares were made through Axis Bank of assessee and payment has been made on 14.06.2012 vide cheque no. 138919 for an amount of Rs.32,21,213.10 to the recognized stock broker of Bombay Stock Exchange M. Prasad & Co. We also note from perusal of pages 20-23 of paper book which is the extract of pass book of assessee in Punjab National Bank wherein we note that assessee had received sale consideration through bank transaction and we verified the contract note of sale placed at pages 7 to 17 and tallied the entries of sale consideration received by the assessee in her bank account and find it to be correct. We on perusal of page 24, which is the transaction cum holding statement of Stock Holding Corporation of India Ltd. find that the share of M/s. NFGL was held in De-mat account. We note from a perusal of page 26, which is the transaction statement of Demat account shows that M/s. NFGL’s shares of Rs.25,000/- by inter depositing transfer on 15.06.2012. A perusal of page 30 of paper book, which is the transactional statement of Demat account corroborate the sale of scrips of M/s. NFGL (from 07.08.2013 – 30.10.2013). A perusal of pages 34-36 of paper book, which is the ledger of assessee in the books of share broker (01.04.2014 to 31.03.2014) corroborates the sale transaction of scrips of M/s. NFGL. 17. The assessee had sold the shares on 05.08.2013 5000 shares at the value of Rs.820/- per share and paid STT and received a consideration of Rs.40,82,079/- which the assessee received by account payee cheque which is reflected in page 21 of the paper book received on

ITA No.1254-1255/Kol/2018 A.Y.2014-15 Navin Kr. Kajaria & Smt. Sushila Devi Kajaria Vs. ACIT Cir-35/36 Kol Page 28 24.08.2013. Likewise, the other sale transactions are reflected from pages 8 to 17 of the paper book for different rates from Rs. 845/- per share, Rs.865/- per share, Rs.920/- per share, Rs.921/- per share etc. and the assessee has received the said consideration through account payee cheque. It was pointed out by the Ld. AR that when a show cause notice was given by the AO on 09.12.2016 wherein the assessee was asked to explain why the sale consideration of Rs.2,16,49,202/- shall not be added back u/s. 68 of the Act as well as Rs.10,82,460/- being 5% of the said sum be added u/s. 69C of the Act, the assessee promptly replied to it. The AO acknowledges that the assessee had replied vide letter dated 22.12.2016 which the AO has stated to have been placed on record. However, it was brought to our notice that the AO has not made any adverse finding in respect to the submissions made by the assessee in justifying the LTCG claim. It was brought to our notice that no attempt has been made by the AO to issue summons u/s. 131 or 133(6) of the Act to any of the parties involved in all these transactions to record any adverse inference against the assessee, and without doing so, the AO has simply concluded on the basis of the presumption and assumption and circumstantial evidence and on preponderance of probabilities has debunked the entire evidence submitted before the AO to saddle the entire sale consideration and to allege commission given @ 5% which comes to Rs.10,82,460/- against the assessee Thus we note that the assessee had furnished all primary evidences in the form of bills, contract notes, de Mat statements and bank accounts to prove the genuineness of the transaction relating to purchase and sale of shares resulting in LTCG. By adducing these evidences, the assessee had discharged the onus on her to prove the genuineness of the transaction which yielded her LTCG. Once the assessee had discharged her onus, then the onus shifted to the shoulders of AO then the AO has to examine the veracity of the documents produced by the assessee and if it is found to be correct and valid then in all fairness the AO should accept the claim of LTCG. In case if the AO on verification finds that the documents produced by the assessee is false or fabricated, then the AO should bring his adverse findings to the notice of the assessee and confront her with the adverse material/findings. Then again the onus will shift to the assessee to prove the genuineness of the transaction. Here, in the present case is concerned, the AO after going through the documents, failed to return a finding that documents produced by assessee to substantiate the yield of LTCG was false or fabricated. The facts of the case as discussed, and the evidence adduced by the assessee, support that the transaction made by the assessee through registered stock broker through Bombay Stock Exchange, after remitting STT and all payments were transacted through bank and the shares were held in De mat account, has to be accepted in the absence of any other material to suggest an adverse view. The AO/Ld. CIT(A) erred in rejecting legally admissible evidence and wrongly took adverse view against the claim of assessee based on surmises, suspicion and conjecture. This action of AO/Ld. CIT(A) is akin to convert “Proof into no proof.” We note that AO while describing the modus operandi adopted by unscrupulous elements in the financial markets has made a vague statement that some accommodation entry provider has admitted that M/s. NFGL also indulged in wrong practices, however, we sought the Ld. DR’s help to throw some light on this specific allegation made by the AO. However, other than the bald statement, nothing adverse could be found against the shares of M/s. NFGL. Even if for argument sake if there was such an adverse admission made by an accommodation provider against M/s. NFGL, then the AO in all fairness had to confront the assessee with the adverse material and given an opportunity to the assessee to meet it and the assessee should have been given an opportunity to explain it; and in case the assessee desires, she should have been allowed to cross examine the accommodation provider or else the adverse material cannot be acted upon to draw adverse inference against the assessee as held by the Hon’ble Apex Court in Andaman Timber Industries Vs. Commissioner of Central Excise 62 Taxman.com 3. It should be kept in mind that assessee cannot be kept in dark as to the material against her and it has to be given to the assessee if AO proposes to use it against the assessee and these are the basic natural justice principles the AO has to keep in mind while framing an assessment. Though AO/Ld. CIT(A) have been swayed by the report of SEBI/Investigation Wing of the department, both the authorities could not point out what was the role of the assessee in any wrong doing which is prohibited by law. We note that neither the purported adverse reports relied on by the AO has

ITA No.1254-1255/Kol/2018 A.Y.2014-15 Navin Kr. Kajaria & Smt. Sushila Devi Kajaria Vs. ACIT Cir-35/36 Kol Page 29 been brought on record nor is there any reference to any finding of such report which directly accuses the assessee in any wrongful actions. The AO has merely carved out certain features/modus operandi of companies indulging in practices not sanctioned by law and as mentioned in such report. We note that neither any investigation were carried out against the assessee, nor against the brokers to whom the assessee dealt with or the companies in which the assessee dealt with the purchase and sale of shares in question were done by the AO. The transaction in question and the fact that the shares in question were quoted and transaction happened on the floor of the stock exchange in public view which action has not been interdicted by the securities watchdog SEBI. In such a scenario, to paint the entire share transaction of M/s. NFGL which yielded high capital gain as bogus is not correct without materials to support such an adverse finding. We note in the light of the aforesaid relevant evidences, the action of the AO and CIT(A) was not justified in rejecting the claim of the assessee on the basis of theory of surrounding circumstances and human conduct and preponderance of probability against the assessee. For that we rely on the decision of the Special Bench of Mumbai Tribunal in the case of GTC Industries Ltd. Vs ACIT (supra) for this proposition. The various facets of the contention of the ld. AR(supra), to rope in the assessee and for drawing adverse inferences, which remain unproved based on the evidence available on record are not reiterated for the sake of brevity. 18. At the cost of repetitions, we find that the transactions of the sale of shares by the assessee was duly supported by relevant evidences including contract notes, demat statement, bank account reflecting the transactions, stock brokers have confirmed the transactions, the stock exchange have confirmed the transactions, the shares have been sold on the online platform of the stock exchange and each trade of sale of shares were having unique trade number and trade time. It is not the case of the AO that the shares which were sold on the date mentioned in the contract note were not the traded price on that particular date. The AO doubted the transactions due to the high rise in the stock price and for that the assessee cannot be blamed unless there was any material/ evidence to prove that the assessee or any one on his behalf has rigged or manipulated the stock price. It should be noted that the stock exchange of SEBI are the statutory authority appointed by the Government of India to ensure that there is no stock rigging or manipulation. The AO has not brought any evidence on record to show that these agencies have alleged any stock manipulation against the assessee or the brokers or the companies in question. In absence of any relevant evidences it cannot be said that merely because the stock price moved sharply, the assessee was to be blamed for bogus transactions. It is pertinent to note that the assessee has purchased the stocks through registered brokers and thereafter the assessee has sold the shares through the registered share/stock brokers with Calcutta Stock Exchange, and both have confirmed the transactions and have issued valid contract notes as per law; and the Hon’ble Calcutta High Court in the case of Principal CIT vs Rungta Properties in ITA No.105 of 2016 dated 08 May, 2017 wherein it was held that “on the last point, the tribunal held that the AO had not brought relevant material to show that the transactions in shares of the company involved were false or fictitious. It is the finding of the AO that the scripts of this company was executed by a broker and the broker was suspended for some time. It is the assessee’s contention that even though there are allegations against the broker, and for that reason the assessee cannot be held liable on this point, the tribunal held that – “As a matter of fact the AO doubted the integrity of the broker and the broker firm and also AO observed that the assessee had not furnished any explanation in respect of any discussion of trading of shares. The AO relied the loss of Rs.25,30,396/- only on the basis of information submitted by stock as fictitious. The AO has also not doubted the genuineness of the documents placed by the assessee on record. The AO’s observation and conclusion are merely based on information. Therefore on such basis, no disallowance can be made and accordingly we find no infirmity in the order of the ld. CT(A), who has rightly allowed the claim of the assessee. This ground no.1 of the revenue is dismissed.”

ITA No.1254-1255/Kol/2018 A.Y.2014-15 Navin Kr. Kajaria & Smt. Sushila Devi Kajaria Vs. ACIT Cir-35/36 Kol Page 30 We agree with the reasoning of the tribunal on this point also. We do not find any reason to interfere with the impugned order. The suggested question, in our opinion do not raise any substantial question of law. 19. In the light of the documents furnished i.e. (i to v & i to iii) in Para 3(supra) we find that there is absolutely no adverse material to implicate the assessee to have entered into any illegal actions/ modus-operand prohibited by law as alleged by the AO against the assessee, which in our considered opinion has no legs to stand and therefore has to fall. We take note that the ld. DR could not controvert the facts supported with material evidences which are on record and could only rely on the orders of the AO/CIT(A). We note that in the absence of material/evidence the allegations that the assessee/brokers got involved in price rigging/manipulation of shares must therefore also fail. At the cost of repetition, we note that the assessee had furnished all relevant evidence in the form of bills, contract notes, demat statement and bank account to prove the genuineness of the transactions relevant to the purchase and sale of shares resulting in long term capital gain. These evidences were neither found by the AO nor by the ld. CIT(A) to be false or fictitious or bogus. The facts of the case and the evidence in support of the evidence clearly support the claim of the assessee that the transactions of the assessee were genuine and the authorities below was not justified in rejecting the claim of the assessee that income from LTCG is exempted u/s 10(38) of the Act. For coming to such a conclusion we rely on the decision of the Hon’ble Calcutta High Court in the case of M/s. Alipine Investments in ITA No.620 of 2008 dated 26th August, 2008 wherein the High Court held as follows : “It appears that there was loss and the whole transactions were supported by the contract notes, bills and were carried out through recognized stock broker of the Calcutta Stock Exchange and all the bills were received from the share broker through account payee which are also filed in accordance with the assessment. It appears from the facts and materials placed before the Tribunal and after examining the same, the tribunal allowed the appeal by the assessee. In doing so the tribunal held that the transactions cannot be brushed aside on suspicion and surmises. However it was held that the transactions of the shares are genuine. Therefore we do not find that there is any reason to hold that there is no substantial question of law held in this matter. Hence the appeal being ITA No.620 of 2008 is dismissed.” 20. We note that the ld. AR cited plethora of the case laws to bolster his claim which are not being repeated again since it has already been incorporated in the submissions of the ld. AR (supra) and have been duly considered by us to arrive at our conclusion. The ld. DR could not bring to our notice any case laws to support the impugned decision of the ld. CIT(A)/AO. In the aforesaid facts and circumstances of the case, we hold that the ld. CIT(A) was not justified in upholding the addition of sale proceeds of the shares as undisclosed income of the assessee u/s 68 of the Act. We note that though the department was aware that the assessee had purchased the 25000 shares of M/s. NFGL in AY 2013- 14, for Rs.32,21,269/- has not reduced the same from the total sale consideration of Rs.2.16 cr. It is elementary that income can be computed only after defraying the cost. So the action of AO to add the entire sale consideration of Rs.2.16 cr. itself is arbitrary exercise of power and cannot be sustained. Therefore, the action of the Ld. CIT(A) in confirming the addition of entire sale consideration of M/s. NFGL is perverse and is directed to be deleted. Consequently, the addition of 5% as commission to the tune of Rs.10,82,460/- cannot be also sustained and ordered to be deleted. The assessee’s appeal succeeds.” 5.1. Similarly the ld DR could not controvert the similar findings recorded by the coordinate bench decision of this tribunal in the case of Shreyans Chopra vs ACIT in ITA No. 661/Kol/2018 dated 25.7.2018 for Asst Year 2014-15 in respect of shares of S R K Industries Ltd.

ITA No.1254-1255/Kol/2018 A.Y.2014-15 Navin Kr. Kajaria & Smt. Sushila Devi Kajaria Vs. ACIT Cir-35/36 Kol Page 31 5.2. We hold that the revenue fails to indicate any specific evidence against the assessee in above terms qua the LTCG derived from transfer of shares in the aforesaid 17 ITA No.1650/Kol/2018 Aditya Vikram Sureka HUF A.Yr. 2014-15 17 two companies. We therefore adopt the above extracted reasoning mutatis mutandis to delete the impugned bogus LTCG addition of Rs 96,17,065/-. Consequently the addition made towards unexplained expenditure on account of commission of Rs 48,085/- also stands automatically deleted” 4. The situation is no different in the instant lead case as well, the Revenue has failed to pin-point any specific evidence rebutting correctness of assessee’s voluminous details regarding the share transactions in issue. I adopt the above detailed reasoning mutatis mutandis to delete the impugned business loss(es) disallowance / addition of ₹2,93,720/- as well as commission @ 5% (supra) in these facts and circumstances. Former assessee’s appeal ITA No.1254/Kol/2018 succeeds accordingly. 5. Same order to follow in latter assessee’s appeal ITA No.1255/Kol/2018 as it has come on record that the issue involved therein is very much identical in the nature of loss on trading in securities treated as bogus by both the lower authorities. 6. These two assessees’ appeal(s) ITA No. 1254 and 1255/Kol/2018 are allowed in above terms. Order pronounced in open court on 03/04/2019 Sd/- (S.S. Godara) Judicial Member Kolkata, *Dkp/Sr.PS "दनांकः- /04/2019 कोलकाता आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. आवेदक/Assessee-Navin Kr. Kajaria/Smt. Sushila Devi Kajaria, 32, Armenian Street, Kolkata-001 2. राज�व/Revenue-ACIT Cir-35/36, Aayakar Bhawan Poorva 110, Shantipally, 7th Floor, Kolkata-107 3. संबं%धत आयकर आयु'त / Concerned CIT 4. आयकर आयु'त- अपील / CIT (A) 5. (वभागीय �+त+न%ध, आयकर अपील�य अ%धकरण कोलकाता / DR, ITAT, Kolkata 6. गाड- फाइल / Guard file. By order/आदेश से, सहायक पंजीकार आयकर अपील�य अ%धकरण, कोलकाता ।